Third-quarter profit for Bank of America Corp., the second-largest U.S. bank, surged as it saw increases from investments and interest charged on loans.
THE RESULTS: Net income jumped to $2.5 billion in the July-September period, up from $340 million a year earlier. On a per-share basis, earnings were 20 cents beating the 19 cents expected by financial analysts.
Third-quarter revenue slipped to $22.2 billion from $22.5 billion, coming in close to the analysts’ forecast of $22 billion.
HOW IT HAPPENED: Bank of America said it had strong growth in lending, along with improved quality of outstanding loans and high deposit balances. The amount set aside for potential losses on loans dropped sharply to $296 million from $1.8 billion a year earlier.
Charlotte, N.C.-based Bank of America has been slimming down and cutting jobs since CEO Brian Moynihan took over in early 2010. The strategy is meant to make the bank easier to manage and to reduce riskier businesses. The bank cut expenses in the third quarter by about $1 billion from a year earlier, to $16.4 billion. It cut 24,651 full-time jobs.
Also, the big jump in net income reflected that last year’s third-quarter profit was weighed down by one-time charges, including a $1.6 billion charge for legal expenses and a $1.9 billion charge stemming from an accounting rule that governs how banks value their debt. That made the latest quarterly earnings much fatter by comparison.
WHAT’S NEXT? The bank says it expects the economy and business conditions to continue to improve, and that it’s in a position to capitalize on that.